Iran ‘complicating paths’ for RBA and other central banks

A major US–Israel military strike on Iran has triggered a rapidly escalating regional conflict that is already disrupting key trade routes and global energy flows, raising the risk of higher fuel costs, shipping delays and renewed inflation pressure, according to an analysis led by Cartwright.

Cartwright describes the situation as a “major escalation with systemic risks”, warning the strikes and retaliation have increased the likelihood of a broader regional conflict.

What happened, and why does it matter?

The conflict began on 28 February 2026 when the United States and Israel launched a joint strike on Iran, targeting senior political and military leadership and key sites. Iran retaliated with missile and drone attacks across the region, and the fighting has quickly shifted from a security crisis to an economic one.

Cartwright says the conflict is already disrupting global energy supply and warns the fallout could be “substantial” if hostilities spread or become prolonged.

Why are petrol prices and inflation back in focus?

Oil prices have surged as traders price in supply disruption, rising freight and insurance costs, and the possibility of longer-lasting instability.

Cartwright warns the world economy is moving into an “oil supply shock”.  “Consumers and businesses will pay more for energy,” he says, saying this in turn can squeeze household budgets, lift business costs and reduce spending in other areas.

That matters because inflation in many economies is still proving sticky. A fresh jump in energy prices risks pushing headline inflation higher again - exactly the kind of shock central banks don’t want as they weigh whether to cut rates.

What’s happening to shipping—and what could it mean for supply chains?

The most immediate disruption is hitting trade routes and logistics.

“Shipping through the Strait of Hormuz has collapsed,” Cartwright says, noting this a critical development given how much global oil and gas - (around 20 per cent of the world’s supply of both commodities - normally passes through the chokepoint. He also warns “Red Sea risks have re-emerged,” raising the prospect of further disruption on another major artery linking Asia and Europe.

In practical terms, that can mean longer shipping routes, higher freight costs, tighter insurance conditions, and delays that ripple into supply chains-from fuel to manufactured goods.

Could this change the outlook for interest rates?

Higher energy costs complicate the path for central banks, particularly if oil prices stay elevated.

Cartwright says the conflict is delivering a “global energy shock,” with “macroeconomic implications intensifying”. This is “complicating paths” for central banks globally, but most especially for the US Federal Reserve, the Bank of Japan and the Bank of England, Cartwright says.

In market terms, that raises the risk that expected rate cuts get pushed back if policymakers worry that an energy-driven lift in inflation will linger.

How could things develop from here?

The analysis suggests escalation is the most likely near-term direction.

“Diplomatic off-ramps remain limited,” Cartwright says. “Escalation remains the base case,” he says, warning that “substantial geopolitical and economic consequences” will result if the conflict widens or becomes prolonged.

Read Madison Cartright’s full analysis.